Continuing to invest in a mutual fund on a regular basis can reap great dividends over a period of time. Notably, the returns delivered in the later years deliver returns at a faster pace than in the earlier years.
The difference could sometimes be so massive that this ‘compounding’ is referred to as nothing short of ‘magic’. Here, we zero in on a mutual fund scheme i.e. ICICI Prudential Multi Asset Fund to demonstrate how the returns have grown in the past few years. This scheme by ICICI Prudential Mutual Fund was launched on Oct 31, 2002.
If an investor had invested ₹1 lakh in this scheme, the investment would have swelled to ₹1.32 lakh in just one year’s time, reveals the Prudent Fact Sheet as on June 30, 2024. The same investment would have grown to ₹1.88 lakh in a span of three years, and ₹2.48 lakh in half a decade i.e., in five years.
And if someone had invested the same amount at the time of launch i.e. in Oct 2002, ₹one lakh investment would have grown to ₹6.8 lakh now.
This, however, does not tell the entire story. The massive returns are pocketed when investment is made in regular doses via systematic investment plans i.e., SIPs.
Suppose an investor had decided to invest ₹10,000 every month in this mutual fund scheme via SIP, the investment would have grown to ₹1.39 lakh in one year by making an investment of only ₹1.2 lakh. Now, had the investor been disciplined enough to continue this SIP for 3 years, the investment would have grown to ₹5.13 lakh by making an investment of only ₹3.6 lakh.
Likewise, in five years, one would have accumulated ₹11.12 lakh by investing only ₹6 lakh. In seven years, this investment would have grown to ₹17.52 lakh by making an investment of ₹8.4 lakh.
| Year | Investment (Rs) | Return (Rs) | CAGR (%) |
| 1 | 1.2 lakh | 1.39 lakh | 32.32 |
| 3 | 3.6 lakh | 5.13 lakh | 24.60 |
| 5 | 6 lakh | 11.12 lakh | 25.02 |
| 7 | 8.4 lakh | 17.52 lakh | 20.68 |
| 10 | 12 lakh | 30.32 lakh | 17.70 |
| 15 | 18 lakh | 69.37 lakh | 16.36 |
| Inception | 26.10 lakh | 2.67 crore | 18.21 |
(Source: digitalfactsheet.icicipruamc.com)
As mentioned earlier, longer the tenure, the higher the returns. What if the SIP were continued for a decade i.e., 10 years? Then the investment would have grown to ₹30.32 lakh. And in 15 years’ time, the investment would have swelled to ₹69.37 lakh by making an investment of ₹18 lakh via SIPs.
If an investor were investing ₹10,000 regularly via SIP since the inception of scheme in Oct 2002, the total investment would have accumulated to ₹2.67 crore by investing only ₹26.10 lakh.
Sounds incredible, doesn't it? This is the power of compounding.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
